please help me on this question MOSS COMPANY Selected Balance Sheet Information

ID: 420991 • Letter: P

Question

please help me on this question

MOSS COMPANY Selected Balance Sheet Information December 31, 2017 and 2016 2017 2016 Current assets Cash Accounts receivable Inventory $89,650 $31,800 42,000 55,100 30,000 65,000 Current liabilities Accounts payable Income taxes payable 40,400 2,550 30,700 3,200 MOSS COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses $534,000 351,600 182,400 Depreciation expense $46,000 Other expenses Income before taxes Income taxes expense Net income 127,000 173,000 9,400 5,900 $ 3,500 Use the information above to calculate this company's cash flows from operating activities using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) Cash flows from operating activities et income 3,500 Adjustments to reconcile net income to operating cash flow Prey 4 of 18 Next

Explanation / Answer

Indirect method for operating cash flow

In Indirect method we start with net income and adjust for various activities to find the net cash flow

Step 1

We start with net income

Step 2

Adjust for non-cash activities - We add non-cash expenses/ we subtract the gains

Here depreciation expense is added

Step 3

Adjust for the changes in asset accounts

Asset account increases- subtract amount from income

Inventory = | 65000-55100 | = 9900

Asset account decreases: add amount to income

Account receivable = |30000 -42000|= 12000

Inventory has increased, so we subtract it

Accounts receivable has decreased .So we add it

Step 4

Adjust for the changes in liability accounts

Liability account increases: add amount from income

Accounts payable =|40400-30700| = 9700

Liability account decreases: subtract amount to income

Tax payable =| 2550 – 3200| =650

Indirect method

Net income

3500

Depreciation on fixed assets

46000

Increase (decrease in current assets)

Accounts receivables

12000

inventory

-9900

prepaid expenses

Increase in current liabilities

Accounts payable

9700

Accrue expenses

Tax payable

-650

Net operating cash flow(sum)

60650